Friday, March 27, 2009

Congressman Don Manzullo (R-IL) appeared on The Glenn Beck Show to discuss his concerns with Treasury Secretary Timothy Geithners overreaching proposal that gives the government too much power to regulate the financial services sector. The plan would actually allow the government to seize private property and set pay limits for private employees. Manzullo questioned Geithner on the plan during yesterday's Financial Services Committee hearing on the issue.

3 comments:

Which provisions of the Geithner plan would (a) allow the government to seize private property and (b) set pay caps?

I think (and I've read very little admittedly yet on this) that the main aims are (a) a system where the 6 largest financial institutions have 6 different regulators who don't know what the other 5 are doing didn't work well and (b) we probably need some sort of insolvency or similar provisions to handle large complex financial institutions (the FDIC is OK for small banks and Chapter 11 works for widget makers) - that we don't have clear rules and procedures is a large part of the reason we had Lehman, AIG, Citi, etc etc (I'd say the lack of clarity on this was deliberate - I think the larger players felt - rightly, save Lehman - they would be bailed out and no one in Washington - of either party - really wanted to rock the boat).

I actually agree with you on the Big 3 (I think merging GM & Chrysler as a somewhat smaller company could work) - I don't think you want an out of control bankruptcy that leads to liquidation rather just see them through so they come out smaller and with less debt and less onerous UAW contracts. This is basically the govt acting as the DIP lender in bankruptcy.

I'm hardly a socialist but had the Treasury (Paulson/Geithner) not acted to bail out the big banks, it would have been complete disaster - if it is big enough to bail out it is big enough to let the bailer-outer (is that a word) have a say. Though, absent a benevolent omnipotent and omniscient deity willing to work on civil service salary, I'm not sure what the ideal regulatory framework looks like. We'll probably get some sensible regulation, then go overboard then we will deregulate some then deregulate too much only to re-regulate etc etc.